The Risk of Tranches Created from Mortgages

Posted: 15 Oct 2010

See all articles by John C. Hull

John C. Hull

University of Toronto - Rotman School of Management

Alan White

University of Toronto - Rotman School of Management

Date Written: October 13, 2010

Abstract

Using the criteria of the rating agencies, the authors tested how wide the AAA tranches created from residential mortgages can be. They found that the AAA ratings assigned to ABSs were not totally unreasonable but that the AAA ratings assigned to tranches of Mezz ABS CDOs cannot be justified.

Keywords: Fixed Income, Structured Products, Asset-Backed Securities (ABS), Collateralized Debt Obligations (CDOs)

Suggested Citation

Hull, John C. and White, Alan, The Risk of Tranches Created from Mortgages (October 13, 2010). Financial Analysts Journal, Vol. 66, No. 5, 2010, Available at SSRN: https://ssrn.com/abstract=1691786

John C. Hull (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
(416) 978-8615 (Phone)
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Alan White

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-3689 (Phone)
416-971-3048 (Fax)

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